BMW Downplays Wages in Site Selection : Automobiles: The German car maker says it chose South Carolina because it wants to be close to an Atlantic shipping port and far from the traditional auto-making environment.
German luxury-car maker BMW chose a South Carolina site for its U.S. assembly plant because it wanted to avoid traditional U.S. auto-making environments and be close to an Atlantic shipping port, the firm said Tuesday.
In announcing a $250-million to $300-million factory near Spartanburg, S.C., that could employ up to 2,000 in its first phase, BMW executives insisted that low wage rates in the right-to-work state were not the main reason for the selection.
But the company’s top manufacturing executive, Bernd Pischetsrieder, told reporters here that total labor costs at the South Carolina plant will probably be 30% less than at its German assembly plants.
In news briefings at Munich, the Greenville-Spartanburg airport and Detroit, BMW executives confirmed long-rumored plans to become the first European auto maker to build cars in the United States since Volkswagen closed its Pennsylvania plant in 1988.
The plant near Greer, S.C., midway between Greenville and Spartanburg in the northwestern corner of the state, will be the sole production source for a new luxury model, about half of which will be exported to Europe and elsewhere.
Production will begin in 1995 at a rate of 300 a day, or 72,000 a year, making it a relatively small plant that could only be profitable if it built high-priced, high-margin cars. If there is demand, BMW is prepared to double its investment and its production capacity at the 900-acre site, said Helmut Panke, BMW’s director of corporate planning.
Damping speculation that it would build a new “entry-level” model there, BMW officials would say only that the car will be priced somewhere between $23,000 and $78,000, the range for its current lineup. The car will use German-built engines and transmissions, but all components unique to the new model will be built in the United States, the company said. BMW plans for 50% of the value of the car to originate in this country.
Pischetsrieder said BMW spent three years reviewing 250 possible sites outside Germany in deciding where to expand. Despite losing ground in the United States for most of the past six years, the company has enjoyed steady growth worldwide and is near its production capacity. It has three assembly plants in Germany and one in South Africa.
Pischetsrieder said that, like other auto companies in the increasingly global market, BMW wants to produce in the markets where it sells.
More than 100 of the potential sites were in the United States, its biggest single market outside Germany. The only other sites it has publicly identified were Omaha, Neb., and Anderson, S.C.
There is no indication that a West Coast site was considered by BMW or proposed by local officials, despite the pending closure of the General Motors plant in Van Nuys.
Jack Kyser, chief economist for the Economic Development Corp. of Los Angeles County, said a West Coast site probably would not make sense because of BMW’s need to import components from Europe and export finished vehicles to Europe.
Pischetsrieder said BMW did not want to take over an existing plant or “do it in an environment in which people are used to producing motor cars in the manner in which it’s been done for the last 50 years.”
He indicated that BMW hopes to achieve the same kind of workplace transformation that Detroit’s auto makers are attempting in an effort to emulate the teamwork and other efficiencies credited to the Japanese.
Pischetsrieder dodged the question of whether BMW will resist a promised campaign by the United Auto Workers union to organize the work force at the South Carolina plant. But he indicated that BMW doesn’t care for UAW wage rates any better than it likes its costs in Germany.
Noting that the average hourly wage in that part of South Carolina is about $10 an hour, Pischetsrieder said, “We might not pay $10 an hour, but we definitely won’t pay $18 as we are in Germany, with a union or without a union.”
General Motors currently pays $17 an hour to assemblers represented by the UAW. Benefits and other costs have ballooned GM’s total hourly tab to about $34 an hour, and German workers cost slightly more.
